Microfinance In SME

With the start of industrialization, the concept of SMES was first introduced in Mauritius in the 1960s. In line with Indian Ocean Times (2014), these SMEs accounted up to 40% of GDP and up to 255,000 workers were employed in the Mauritian economy It is therefore evident that SMEs are labour intensive businesses as they open doors to many job creation as well as is an efficient tool to reduce poverty. Moreover, the minister of Finance has introduced a major tax reform in order to encourage the SMEs’ expanding their export capacity as well as seeking new markets. According to the latest budget, instead of being taxed at 15%, profits from exports of goods will be taxed at a lower rate of 3%.

On the other hand, the main institution which

• To know how much microfinance is facilitating access to loans

• To investigate whether or not SMEs have been able to achieve significant product level with the help of the loans.

• To find out whether the non-financial services of microfinance is contributing to the business of SMEs. 1.4 Problem Statement

Despite the fact that the SME sector is a very important one in Mauritius by contributing to boost up the economy by participating in GDP growth, by reducing the level unemployment in the country and also by competing with international firms particularly in the African region, they face many problems in terms of finance and business development, survival and growth. However, support is needed from the government and financial institutions such as in order to avoid failure of business and to be able to grow and develop in competitive enterprises. On the other hand, it is imperative that they need to be trained in several aspects and be financially literate to be able to manage their respective businesses in order to survive, grow, develop and be competitive enough to benefit to the whole

Still, many SMEs are having problems to access finance in order to expand their businesses or even to survive. Banks and financial institutions play an important role in terms of providing credits to support the economic growth. Bank financing is critical to the functioning of the economy since it is an important source of funding to support SMEs development. Nevertheless, Fredriksson and Moro (2014) theorised that banks and financial institutions are reluctant to provide credit lending to SME sector due to the riskiness of early stage ventures in terms of insufficient assets, having no proven track record and low capitalization. As a result, they do not see this sector as a profitable business. In other words, they do not see worthwhile returns on SME investments or whether such investments would provide a potential